William Hill Bid in Balance as $4 Billion Offer Rejected Again

Rank Group and 888 Lose William Hill Takeover Bid
  • Suitors improve stock element of proposal for U.K. bookmaker
  • William Hill shares drop on concern 888, Rank may walk away

William Hill Plc rejected an increased 3.1 billion-pound ($4 billion) offer from 888 Holdings Plc and Rank Group Plc, showing the bidders face a difficult task in persuading the U.K.’s biggest bookmaker to negotiate a takeover ahead of a looming deadline.

The two sides can’t even agree on the valuation of the suitors’ second bid, which would accelerate a round of betting-industry consolidation that has included the pending merger of competitors Ladbrokes and Coral, and the combination of Paddy Power and Betfair. William Hill said Monday that the new bid was worth 352 pence a share, while Rank and 888 gave a valuation of 394 pence.

The rejection ratchets up the stakes ahead of the Aug. 21 deadline for the suitors to make a formal offer. William Hill shares fell further below the bid price as analysts remained skeptical that a deal will materialize. The bookmaker has cited both the price of the offer and the risk presented by a potential 2.2 billion pounds of additional debt as reasons for rejecting the “highly complicated” bid.

“We continue to believe this deal is unlikely to happen,” analysts at Berenberg said in a note Monday. Rank and 888 probably won’t raise their terms again, while William Hill’s board is unlikely to shift its stance, they said.

William Hill shares fell 3 percent to 323.6 pence at 12:33 p.m. in London, after declining as much as 3.3 percent.

Valuation Gap

888 and Rank are debating whether to walk away or raise their offer further to try to get William Hill to the negotiating table, according to a person familiar with the matter. While the buyers have scope to sweeten both the cash and stock element of the offer, there is growing frustration about William Hill’s refusal to talk amid disagreements over the valuation, the person said. No final decisions have been made.

William Hill said the latest cash-and-stock proposal compares with a first bid of 339 pence. The valuation is based on share prices as of July 22, the last trading day before the takeover approach was announced, the company said.

Rank and 888 said their latest bid valuation is based on Aug. 5 share prices and their calculation of their own merger. The suitors increased the stock element of their bid, while leaving the cash portion unchanged at 199 pence a share. William Hill shareholders would own 48.8 percent of the combined company, compared with 44.6 percent under the original terms.

William Hill said it’s now calculating the value by reference to the combined market capitalization of the three companies on July 22. It had originally based its sums around the terms of a stock offer for Rank by 888 that would precede their proposed takeover of William Hill.

The suitors, who are being advised by Morgan Stanley, said their valuation of 394 pence doesn’t include potential cost savings of more than 100 million pounds a year. They estimate those to be worth an additional 52 pence a share.

‘Moves Nothing’

The new proposal “moves nothing forward,” William Hill Chairman Gareth Davis said in a statement. “I can’t engage in something based on risk, debt and hope.”

The bidders are likely to have to raise their offer to “well over” 400 pence a share, according to Simon French, an analyst at Cenkos Securities.

Citigroup and Barclays are advising William Hill.

Rank and 888 have said the combined group would be Britain’s largest gaming company across all platforms, including William Hill betting shops, Mecca and Grosvenor bingo halls and online wagering sites.

Rank on Monday delayed the announcement of its financial results for the latest fiscal year by five days, until Aug. 23, citing the William Hill bid.

(Updates with person familiar comments in sixth paragraph.)
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